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China Mobile to Make First International Purchase (Update1)
By Janet Ong
Jan. 22 (Bloomberg) -- China Mobile Communications Corp., the world's biggest cell-phone company, agreed to buy Pakistan's Paktel Ltd. in its first overseas acquisition, gaining a foothold in a mobile market that almost tripled in 18 months.
China Mobile, based in Beijing, will pay $284 million to buy 89 percent of Paktel from Millicom International Cellular SA, the Luxembourg-based company said yesterday in a statement.
The acquisition will allow China Mobile to export the marketing tactics and technology it developed in the rural areas of China, the world's largest market by users. Mobile-phone subscribers in Pakistan more than doubled in five of the past six fiscal years to 46 million at the end of November, according to the nation's telecommunications regulator.
``China Mobile must have seen the tremendous growth and the market's potential to grow in coming years,'' said Mohammed Sohail, director at Jahangir Siddiqui Capital Markets Ltd. in Karachi. ``It is the value of license that is significant because the government is not issuing new licenses and any company will have to buy the existing licenses to start services.''
The so-called enterprise value of the transaction is $460 million, including debt, the Millicom statement said. China Mobile failed in July last year to buy Millicom, which has networks in emerging markets including Latin America, Asia and Africa, and lost a bid for Pakistan Telecommunication Co. to Emirates Telecommunications Corp. Rainie Lei, a spokeswoman for China Mobile Ltd., the Hong Kong-listed unit, confirmed the details of the deal.
Good Place to Start
``China Mobile may think Pakistan is a good place to start'' its international investments, Francis Cheung, an analyst at CLSA Ltd. said. ``The money is a drop in the bucket for China Mobile.''
Thirty percent of Pakistan's 169 million population had a mobile phone at the end of November, compared with 22 percent in June, the Pakistan Telecommunication Authority said. The number of cellular subscribers rose to 34.5 million at the end of June 2006, from 12.8 million a year earlier, it said.
Paktel, the fifth-largest of the nation's cellular operators, had 1.38 million customers at the end of November, compared with an estimated 1.6 million at the end of October, the regulator said.
``Getting a stake in the No. 5 operator is not good,'' CLSA's Cheung said. ``While Pakistan is a big country, it means China Mobile has no hope of getting into India, the second most attractive mobile market in the world after China.''
The Chinese government last month said technology companies should invest more in African and Southeast Asian nations with which the country is deepening ties.
Loan Policies
Lou Qinjian, deputy minister at the Ministry of Information Industry said in a Dec. 19 speech posted on the ministry's Web site that government departments should adjust loan, insurance and foreign exchange policies to support such overseas technology investments.
Millicom, founded in 1979 by Kinnevik AB to pursue mobile- phone opportunities in the U.S., has operated in Pakistan since 1990.
``The sale of Paktel allows Millicom to focus on the 16 markets where we have already established strong market positions and, with penetration rates rising rapidly, the prospects in these businesses are good,'' Marc Beuls, Millicom's Chief Executive Officer, said in the statement.
Millicom said on Nov. 13 it wanted to sell its Pakistan unit as soon as possible after concluding it won't get the return on its investment because of challenging business conditions in the nation's wireless market and frequency interference issues.
Shares of China Mobile rose 1.6 percent to HK$71.95 in Hong Kong as the midday break, compared with 1.2 percent gain in the Hang Seng index.
To contact the reporter for this story: Janet Ong in Beijing at jong3@bloomberg.net Last Updated: January 21, 2007 23:46 EST
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